Analysts See Crypto Winter Thaw for Robinhood and Coinbase

Signs of thaw are emerging from the crypto winter, especially for crypto trading platforms Robinhood and Coinbase.

Since Bitcoin achieved its peak roughly one year ago, cryptocurrency markets have been on a downward trend. Known as the crypto winter, the broad selloff of cryptocurrencies has seen burgeoning companies fold and total market capitalization decimated. But signs are emerging of a potential thaw, with prospects for a crypto market recovery.

In October, crypto wallet activity increased almost 7% over Sept., according to data from DappRadar. The blockchain data firm’s metric of unique active wallets averaged at over two million last month. Additionally, as retail investors divest from cryptocurrencies, institutional firms have made significant investments in blockchain technology.

Although significantly affected by the downturn themselves, two firms seem poised to emerge from the malaise in the coming year. Despite mixed third quarter results, Wall Street analysts seem optimistic about Robinhood Markets and Coinbase Global.

Emergent Prospects for Robinhood and Coinbase

Following a meeting with Robinhood CEO Vlad Teneve and CFO Jason Warnick, one analyst seemed confident in their announcements. In addition to products such a self-custody crypto wallet and retirement account, he also highlighted improvements to Robinhood Gold, the platform’s subscription service. One upcoming feature will enable subscriber’s balances with higher-yielding deposit opportunities.

Another analyst felt similarly about Coinbase’s subscription and service elements, emphasizing revenue growth in both of the company’s segments.

Their confidence was also bolstered by Coinbase’s “stable revenue and healthy metrics,” which include a robust user base and assets under management. Citing the 12-18 month timeframe of crypto market cycles, the analyst said Coinbase, “will likely see a surge at some point in 2024.”

Higher Interest Income

Meanwhile, an additional feature of this year’s tumultuous economic fluctuations may have actually proved a boon to these companies. In an effort to tame rampant inflation, the Federal Reserve, along with other central banks, have aggressively raised interest rates.

While these higher rates squeeze companies with higher borrowing costs, Robinhood and Coinbase are seeing increased income from interest-based products.

Through its subscription service, Robinhood provides loans to eligible customers at rather competitive rates, so they can make larger investments. Although cheaper than average, the interest on these loans has been producing higher income due to the Fed’s rate hikes.

For its part, Coinbase earns interest from a pair of products it offers its customers. On the one hand, the interest on Bitcoin-backed loans issued to customers have risen. Additionally, the interest on reserves backing USD Coin (USDC) have also gone up.

Although inflation has sent retail traders scrambling from risky assets such as crypto, rising interest rates seem to be supporting the trading platforms.

Analysts expect net interest revenue at Robinhood to rise some 65%. Meanwhile, IBES data at Refinitiv meanwhile expects Coinbase’s subscription and services revenue, which includes interest income, to grow 28%.